Tuesday, 2nd June, 2015
The Auckland Chamber of Commerce wants an independent investigation to urgently look into complaints it has received from more than 40 Auckland businesses over the business methods of the Auckland Council owned Regional Facilities Auckland CCO.
The Auckland Council-owned Regional Facilities Auckland (RFA) has been accused of using money leveraged from rate payers and doing backroom deals to beat off competition from Auckland businesses.
A group of more than 40 mainly small-medium businesses who met with Auckland Chamber of Commerce CEO Michael Barnett told him that the RFA’s monopolistic business methods was resulting in an inferior event management service that is starting to damage the Auckland brand.
Drawn from across the event industry, including audio-visual, catering, ticketing, equipment hire and event production sectors, the group presented a long list of concerns covering the way RFA is managing Council-owned venues and facilities such as the Viaduct Events Centre, Aotea Centre, Town Hall, Civic, Bruce Mason Theatre and Mt Smart Stadium.
At the heart of their concerns is that the Council-owned company had used its privileged position to leverage rate payer money to create a monopoly with total disregard to the effects on local suppliers or wishes of clients wanting to hire Council-owned venues.
They claim that Council has spent millions of dollars of rate payers’ money to purchase event equipment - from marquees, plastic flooring to audio visual equipment and temporary grandstand seats - which was then being hired to its own venues (and others) at between 30-50% below market rates.
On the surface, this might look a good deal for the rate payer but with hirage being well below commercial rates, it meant private companies were being forced to run at a loss when depreciation, utilisation and return on capital are taken into consideration. Worse, it meant that the rate payer is in fact subsidising a loss making operation, at the expense of local businesses.
A summary of other concerns raised included:
- Instances of losing contracts because they were unable or declined to match commission payments, including offering guaranteed use of hotel rooms or recommending ‘preferred supplier’ status to other clients.
- Being presented with a take-it-or-leave-it caterer – regardless of what their client wanted – and charging more than providers that they and clients would prefer and then failing to provide the standard of service they would expect.
- The decision to remove the choice of New Zealand caterers from public funded venues and replace them with one foreign business had meant the loss for one business of about $1 million in sales to date, the opportunity to offer choice its clients and prospects and the loss jobs.
A number expressed strong objection that the change had been effected under the radar, with many corporates only now becoming aware that when hiring a Council venue their choice of caterer and audio and other services has been seriously restricted and they must deal with the RFA’s contractors.
In respect of the damage to the Auckland event management brand, some said they were so frustrated they are looking at taking conferences scheduled for Auckland elsewhere or withdrawing entirely from events involving Auckland Council venues and facilities.
Representatives of the catering business group told the Chamber that a more fair and transparent solution would be a return to the former system of seeking tenders from three choices of caterers in Council-owned and funded venues. This method bred healthy competition, food innovation, creativity and kept the pricing in check.
Said Michael Barnett: “I was invited to a meeting to listen. I have certainly done that, and what I have heard and followed-up convinces me that there is a serious set of issues that deserves to be investigated further.”
The role of Auckland Council and its CCO’s is surely to promote, engage with and enable and facilitate local businesses – NOT to compete against them.
“I agree that Council’s job is to provide core services and facilities. This is what our rates pay for, but when services and rates provided to a CCO are used to leverage commercial competition with private sector businesses that are also paying rates, we have a serious issue - it’s not on.”
“The more than 40 businesses that raised these concerns can’t all be wrong. I heard enough to convince me that Auckland Council must act to look into this immediately. An independent investigation is needed to get to the bottom of the concerns that were brought to my attention,” said Mr Barnett.